Question

Thomson Co. produces and distributes semiconductors for use by computer manufacturers. Thomson Co. issued $570,000 of 20-year, 7% bonds on May 1 of the current year at face value,, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year.

May 1	Issued the bonds for cash at their face amount.
Nov. 1	Paid the interest on the bonds.
Dec. 31	Recorded accrued interest for two months.

Journalize the entries to record the above selected transactions for the current year.

May 1
Nov. 1
Dec. 31

Answer 1

---Journal entries required

Date	Accounts title	Debit	Credit
01-May	Cash	$570,000
	Bonds Payable		$570,000
	(to record issuance)
01-Nov	Interest Expense ($570000 x 7% x 6/12)	$19,950
	Cash		$19,950
	(to record payment of interest)
31-Dec	Interest Expense ($570000 x 7% x 2/12)	$6,650
	Interest Payable		$6,650
	(to record 2 month interest accrued)